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Transparency Key to Real Tax Reform

The final details of the tax plan that will emerge from this Republican Congress are still a ways off. Last week was only the first salvo. In the months to come there will be skirmishes and battles aplenty. Lobbyists are counting on it, so are politicians eager to fill their campaign coffers.

Some opine, perhaps a tad optimistically, that perhaps nothing comprehensive will pass. Since tax cuts for the wealthy have long motivated the GOP’s donors and anti-government ideologues, the odds are good something, even if not a sweeping rewrite of the code, will become law. Whatever does will have real-world consequences for the nation’s ability to invest in infrastructure, education, health care, environmental protection, public safety and the list goes on.

Tax policy will have an enormous role in determining whether income inequality in the United States continues to grow dramatically. At a basic level, everybody understands the issue. Polls consistently show a majority of Americans believe the wealthy and corporations already pay too little. The mere fact the president and Republican leaders are lying about who will benefit from their initial proposals is strong evidence they fear the sentiment.

Still, it’s easy to lose one’s way among the twisting turns of a tax policy debate – or fall asleep on the journey from sheer boredom. The more policymakers and tax campaigners bring the debate back to underlying principals the better off we will all be.

One key value to keep in sight is transparency.

For those involved in the Secrecy World – the offshore system into which trillions of dollars has disappeared – the most important principal is privacy. But a functioning and fair tax system demands its opposite.

Fortune 500 companies hold an estimated $2.6 trillion dollars offshore. By doing so, they avoid up to $767 billion in U.S. federal income taxes. This is a guestimate. Many multinational companies do not publicly report where they book profits or pay taxes. Their tax avoidance schemes are often disguised or highly opaque as’s Lux Leaks investigation showed. While information may be relayed to individual governments, it’s often not accessible to the public. The lack of detail stymies debate.

The FACT Coalition, an advocacy group promoting financial accountability and corporate transparency, has a good factsheet on the issue as well as ideas for how to reform the system.

Their conclusion is hard to impeach:

“Disclosing more information on where companies book profits, record revenues, and pay taxes would protect taxpayers by discouraging abusive tax avoidance schemes; protect shareholders by providing them with information about the risks associated with their investments; and inform policymakers as Congress considers overhauling the U.S. tax code.”

Panama Papers Update

Panama Papers Secrecy World BookLike the universe, the Panama Papers started with a bang and has been expanding ever since. Beginning with the first publication on April 3, 2016, the Mossack Fonseca files continue to make news, exposing the secrets of the powerful, forcing prosecutors, lawmakers, and civil society to deal with the results. As I put the finishing touches on my new book, Secrecy World: Inside the Panama Papers Investigation of Ilicit Money Networks and the Global Elite, it’s a propitious moment to take stock of some of the latest news.

In recent months, revelations from the Mossack Fonseca files contributed to the removal of the prime minister of Pakistan and the resignation of the chairman of Mongolia’s Ulaanbaatar city council. It also played a factor in the arrest of an Italian fugitive implicated in an elaborate fraud that included laundering money through New York apartments.

New media partners joined the project. The Associated Press probed the holdings of the controversial Thai family behind the Red Bull fortune. The New York Times looked into some of the secret dealings of Russian banks in the files.

Meanwhile, a special inquiry committee of the European Parliament has spent the past year investigating multiple facets of the Panama Papers. The committee’s hearings have focused on the most significant players found in the files, the banks, accounting firms and tax havens that undergird the secrecy world. A good source of information on the committee’s work can be found at a microsite created by the European United Left/Nordic Green Left MEPs.

Back in Panama, firm founders Jürgen Mossack and Ramón Fonseca were jailed for more than two months and finally released in April after each posted a half-a-million-dollar bail. Prosecutors pursued the men over the firm’s alleged involvement in Lava Jato, the extraordinary Brazilian scandal in which authorities accused construction firm Odebrecht of paying $3.3 billion in bribes in more than a dozen countries. Fonseca claimed that MF had little to do with the Odebrecht scandal beyond selling a few anonymous companies, which may have been misused by their buyers. His loud assertions that the current Panamanian administration itself might be implicated in the affair may or may not have had something to do with the length of his and Mossack’s incarceration. Needless to say, prosecutors around the world are still investigating the men and the firm’s activities.

What this year demonstrated is that there is much yet to be revealed from the Panama Papers. More updates to come in the months ahead. On November 21, Secrecy World hits the bookstores. Stay tuned.